Overseas direct investment of $3,242 million has been committed by 449 Indian parties during July in their joint ventures and wholly owned subsidiaries, according to RBI data, comprising $682 million in equity, $828 million in loans and $1732 million in guarantees. This has raised the total ODI to $14,422 million under commitment by 1,883 companies during the first four months of the ongoing fiscal, which is 38 per cent more than $10,402 million by 1,838 companies during the corresponding four months of fiscal 2013.
An Indian Party is a company incorporated in India or a body created under an Act of Parliament or a partnership firm registered under the Indian Partnership Act 1932 and any other entity in India as may be notified by the Reserve Bank.
Singapore was the top overseas investment destination during the month with 87 proposals involving total financial commitment of $622 million. It was followed by USA with 66 proposals worth $85 million, UAE with 43 proposals for $72 million, Mauritius with 37 proposals for $703 million, UK with 24 proposals valued at $250 million, and Netherlands with 20 proposals for $755 million investment. These six countries accounted for 277 proposals that would call for $2,487 million of FDI.
The biggest investment during the month was by Reliance Communications which would be committing $550 million in loans to its Netherlands-based wholly owned subsidiary, Reliance Global Com BV.
Apollo Tyres would be extending equity and guarantee support of $520 million in its Mauritius-based WOS, Apollo (Mauritius) Holdings Pvt. Ltd. Zee Entertainment Enterprises Ltd would be investing $470.6 million in its British Virgin Islands-based wholly owned subsidiary, Zee Multimedia Worldworld Ltd, and Tata Communications would be investing $295 million in Singapore-based WOS, VSNL International Pte.
Recent policy developments
With a view to containing outflow of capital that may put pressure on the Rupee, which is on the downhill in the forex markets, RBI last week announced a reduction in the limit for Overseas Direct Investment under automatic route for all fresh ODI transactions, from 400 per cent of net worth of an Indian Party to 100 per cent of its net worth.
This reduced limit would also apply to remittances made under the ODI scheme by Indian companies for setting up unincorporated entities outside India in the energy and natural resources sectors. Any ODI in excess of 100 per cent of net worth would be considered under the Approval Route by RBI.
These provisions have come into effect with immediate effect and would apply to all fresh ODI proposals on a prospective basis but would not apply to the existing JV/WOS set up under the extant regulations. The reduction in limit, however, would not apply to ODI by Navratna PSUs, ONGC Videsh Ltd and Oil India Ltd, in overseas unincorporated entities and incorporated entities in the oil sector.